5 main leisure firms in South Korea, together with Okay-pop giants SM Leisure and HYBE, have reached an settlement with the market’s Truthful Commerce Fee over alleged subcontracting violations.
The decision marks the primary time a consent decision system was utilized to the manufacturing and repair subcontracting sector because the system was launched in July 2022, the South Korean FTC mentioned in a discover on Tuesday (June 24).
The FTC’s consent decision system permits firms below investigation to suggest voluntary corrective measures as an alternative of going through violations.
The resolutions had been finalized with HYBE, SM Leisure, YG Leisure, JYP Leisure and Starship Leisure after the businesses utilized for the consent process between April and Might 2024, with the fee approving the method in December.
It follows an investigation by the FTC, launched in July 2023, which examined whether or not firms violated subcontracting legal guidelines by failing to problem written contracts upfront when outsourcing manufacturing of music information, merchandise like gentle sticks and dolls, video content material, and efficiency companies together with stage composition, lighting set up and sound gear operations.
South Korea’s Subcontracting Transaction Equity Act requires firms to supply written contracts containing statutory data earlier than work begins, the FTC mentioned.
Below the settlement finalized on June 9, every firm will contribute KRW 200 million ($147 million) to create a KRW 1 billion ($736m) mutual cooperation fund, as an alternative of paying fines to the federal government over their violations.
The fund will present sensible help to suppliers. Every firms have outlined particular assist applications starting from well being checkup subsidies, security gear purchases, to instructional course vouchers.
HYBE, the company behind BTS, has allotted KRW 100 million ($73,600) over the subsequent three years to assist protecting gear purchases for its suppliers. It has additionally earmarked one other KRW 100 million to supply help with buying consumables for video manufacturing equivalent to reminiscence playing cards and batteries.
SM Leisure, dwelling to teams like aespa and NCT, will put aside KRW 50 million ($36,800) for well being checkup bills or vacation presents for workers of suppliers. It additionally earmarked KRW 50 million for video modifying applications and assist for suppliers’ filming gear.
Earlier than finalizing the agreements with the 5 Okay-pop firms, the FTC collected opinions from stakeholders together with the Ministry of Tradition, Sports activities and Tourism and Ministry of SMEs and Startups throughout a 49-day evaluation interval from February to March 2025.
Key reforms embrace provisional contracts that may be transformed to formal contracts, establishing an digital contract system, enhancing in-house contract administration system and enhancing training on subcontracting legal guidelines.
The regulatory motion comes because the Okay-pop economic system continues to develop at dwelling and abroad. In 2023, the Okay-pop market achieved abroad gross sales of KRW 1.24 trillion ($914m), in response to information from Statista. Of the overall, 47.6% got here from abroad performances, whereas 31% had been from abroad album gross sales.
Okay-pop firms have pursued aggressive enlargement methods abroad. Lower than a month in the past, HYBE formally launched a subsidiary in China, the world’s fifth-largest recorded music market. The information follows one other report by South Korean information company Yonhap final month that HYBE can also be planning to determine an workplace in Mumbai, India.
SM Leisure, in the meantime, arrange a Southeast Asian headquarters in Singapore in late 2022. Again in March, the corporate introduced that it might launch a coaching academy for Okay-pop hopefuls within the city-state.
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